Smith School Professors Discuss Holiday Retail Trends

A sampling of retail expertise from faculty at the University of Maryland’s Robert H. Smith School of Business reveals three different perspectives about the 2011 Christmas-holiday shopping season:

• Jie Zhang says both luxury and discount retailers should fare well.
• Rebecca Hamilton says retailers are emphasizing shopping convenience over price discounts
• Wendy Moe says smartphone shopping apps are making shoppers product-and-bargain savvy, which signals to retailers that “getting (shoppers) in the door is no longer enough.”

Zhang, associate professor of marketing and Harvey Sanders Fellow of Retail Management, says she is optimistic about this season, but results will vary by retail sectors. “I think luxury retailers and discount retailers will do quite well in general, and online retailing will be a particularly bright spot,” she said. “In terms of hot products, high-tech gadgets are likely to be the shining stars, especially smart phones, e-book readers and tablet computers.”

In addition to the popularity of certain products, Zhang bases her outlook on a degree of resiliency from the market. “Despite the economic ups-and-downs in recent years, American retailers have time and again defied gloomy predictions on their road to recovery after the 2008 recession.”

Convenience trumps discounts

Recent, recession-tainted holiday retail seasons have taken some toll on retailers, who are discount-weary and seeking means other than price cutting to encourage spending and consumer loyalty, said Hamilton, associate professor of marketing. “Price discounts directly cut the retailer's profit margin, so they have become creative about seeking other ways to encourage customers to part with their money.”

Three general strategies have surfaced: expanded store hours, layaway and personal shoppers.

“While longer store hours may attract customers who otherwise wouldn't have time to shop, the high unemployment rate also helps retailers hire more staff for these extended hours, another reason this strategy is more attractive now than in the past,” Hamilton said.

Layaway was common before credit cards became widely used. Now, with consumers increasingly conscious of avoiding or eliminating debt, layaway plans are thought to be more attractive for large purchases. Hamilton says the strategy further benefits retailers by drawing customers into the store to make periodic payments. “Every time the customer enters the store, there is a chance he or she will make an additional purchase.”

“While layaway targets shoppers with limited budgets and extra time, personal shopper services are for the time-starved instead of the money starved,” Hamilton said.

Mid-level department stores, which have lost customers to discount retailers, have incorporated personal shopping to attract shoppers who have used the service at upscale stores. “Advertising these services also makes these stores, like Macy's and JC Penney, seem upscale,” said Hamilton. “Like expanded store hours, this additional service is made possible by the high number of job seekers. Plus, personal shoppers may work mainly on commission, meaning that their cost to the stores is relatively low.”

Getting them in the door no longer enough

Another demand for retail marketing strategy is emerging thanks to smartphone shopping apps, which are empowering shoppers and challenging stores to “do more than just get customers in the door,”

“Black Friday promotions, for example, attract floods of bargain shoppers,” said Moe, an associate professor of marketing. “Often times, promoted products are in limited supply and many consumers are unsuccessful in battling the crowds to get theirs. So why do retailers do it? They’re trying to get shoppers in the stores. But simply getting shoppers in the door is not enough anymore.”

Moe said today’s shopper is becoming “fully informed, with the smartphone as the weapon of choice.”

Apps with such names as Red Laser, Price Check and QR Code, allow shoppers to scan product barcodes and find better deals nearby… sometimes just steps away. “When your smartphone can provide a list of product prices sorted by geographic distance to where you are standing in the mall, it becomes an easy decision to walk out of the store you’re in, in search of the better price,” Moe said.

“So in today’s market, stores not only need to get shoppers in the door, they also need to offer something to keep them in the store.”